Financial Management During a Medical Crisis

When your loved one has a medical crisis, the last thing you want to — or can — think about is money. Sound financial planning will give everyone peace of mind.

By Linda Foster, MA
Medically reviewed by Cynthia Haines, MD

When your loved one has a medical crisis, there are many difficult emotions to handle and decisions to make. However, it's essential that you have a sound financial management plan in place now to make everything easier later on.

“Laws regarding powers of attorney are state-specific, and you must consult an attorney in your state to get the best advice for your loved one’s situation and to ensure compliance with your state’s laws,” says Phyllis J. Erlich, elder law attorney at the firm of Frank, Frank, and Scherr in Lutherville, Md.

Financial Management For a Loved One’s Medical Crisis

If your loved one is hospitalized but is not incapacitated, have a family meeting at the hospital to determine the person's wishes regarding management of their finances. “Have your loved one review their will, update it if needed, and always have it reviewed by an elder law attorney,” Erlich says.

Ask your loved one who they would like to have in charge of their finances. “Consult an elder law attorney to see if you should get a durable power of attorney (DPA) or guardianship to ensure that your loved one’s financial matters are taken care of if and only if they become incapacitated. A DPA gives authority to one person in the family (the appointee or agent) to manage all legal and financial matters,” says Erlich.

Financial Management: When Your Loved One Is Incapacitated

Management of health issues regarding a loved one who has become incapacitated requires a separate durable power of attorney. Also, if your loved one is unable to make decisions because of a medical crisis, a durable power of attorney is needed for proper financial management. Here’s what you need to know:

Agent’s role. The designated agent is acting as a "fiduciary" (a person entrusted with another’s assets) for the disabled person and is supposed to act in the that person's best interests. Therefore, the agent should not use the disabled person's funds for the agent's own uses or purposes. Erlich recommends that, before using the durable power of attorney, the agent should attempt to locate and identify all of the disabled person's assets.

Consolidating assets. The agent should consolidate the assets of the disabled person whenever possible to avoid the confusion of several checking accounts, savings accounts, and money market accounts.

Proper signature. When signing a document or a check for the disabled person, the agent should sign the disabled person's name followed by the signature of the agent, followed by the language "his or her attorney-in-fact."

Credit cards. The agent should cancel all credit cards of the disabled person except for one that may be used by the agent.

Gifts. “An agent is only permitted to make a gift of the disabled's funds or assets if there is a provision in the DPA which allows gifting,” says Erlich.

Investments. The agent should make conservative investments of the disabled person's funds such as in federally insured bank accounts.

Keeping funds separate. The agent should not commingle, or mix together, his or her funds with that of the disabled person.

Keeping records. The agent should maintain all records, including invoices and bills, to substantiate payments made on behalf of the disabled person.

Working with financial institutions. “It is helpful that the agent place the DPA on file with all of the financial institutions in which the disabled person has accounts so the DPA will be reviewed and accepted by that institution,” Erlich says.

Financial Management: What To Do Without a Durable Power of Attorney

If you do not have a durable power of attorney in place, Erlich suggests that you consult an elder-law attorney to see if you should pursue “guardianship of the estate,” a court-supervised oversight of the guardian acting on behalf of an incapacitated person.

Pursuing guardianship is expensive, but that's because guardianship includes safeguards that are not covered with a DPA or a trust. The oversight by the court ensures that there is no abuse of power and offers the best protection for your loved one.

Providing financial management for your severely ill loved one is very complex. Consult an elder-law attorney to find out about any other options available, such as trusts, guardianships, PODs (payable on death deeds), and TODs (transfer on death deeds). PODs and TODs are very useful tools for avoiding probate court.

Consulting an elder-law attorney will help you determine the best course of action. And remember, because laws vary from state to state, it's critical that you consult an attorney who knows about your state's laws to ensure that you are providing the best financial management possible for your loved one.